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Long live the Pre-Action Protocol

Is it really 16 years ago that we users of the TCC first came face to face with the Pre-Action Protocol for Construction and Engineering Disputes? And for all those years most of us have been extolling its virtues as a great tool to assist early settlement of disputes and yet in the same breath moaning about how it has been subject to such dreadful abuse (always by others, never ourselves!).

The new Protocol was launched jointly by TeCSA and TECBAR on 2 November 2016 at the Rolls Building, with Mr Justice Coulson, Judge in Charge of the TCC, giving the keynote speech. It is due to come into force today, 9 November 2016.

In this blog I look at the main changes introduced by the revised Protocol, as well as the reasons for those changes, and their likely effect.

History of the Protocol

The first Protocol came into force on 2 October 2000 as part of the Woolf reforms. Prior to its introduction, if one party claimed payment from another, it simply wrote a letter before action which said:

“If you don’t pay up within 7 days I am going to sue you.”

The Protocol forced the claiming party to set out the basis of its case, the defending party to say why the monies were not due and, uniquely amongst pre-action protocols, insisted that the parties meet to discuss how best to resolve the dispute.

In my experience, and those of my colleagues, this caused a significant proportion of disputes to settle and thereby saved precious court resources.

In 2012, the final report of the working party concluded that the Protocol could be retained, but that compliance should be voluntary. This was in response to fears (particularly within the judiciary and the bar) that the Protocol:

Acted as a barrier to access to justice.

Impeded cash-flow in the construction industry.

Required significant frontloading of costs.

Could be used by unscrupulous defendants to drag out the process of dispute resolution, in the process incurring a disproportionate amount of costs.

We at TeCSA felt that making compliance voluntary could lead to the demise of the Protocol. We saw this as throwing the baby out with the bath water, as the bar and judiciary were unaware of the number of cases that were successfully resolved during or shortly after the Protocol had been followed. So, in a bid to save it, my colleagues at TeCSA commissioned an independent survey of users of the Protocol (which I blogged about) that demonstrated that its users were overwhelmingly in favour of the continued existence of the Protocol. Out of 677 cases reviewed over the preceding 3 years, 277 had settled before the issue of a claim form (40%): not a bad statistic and one which the judiciary could not ignore. Several users suggested changes that they considered would make it more effective. One of the suggestions that came up time and time again was that the court should become involved if a party failed to comply with or abused the Protocol.

I am pleased to say that the revised Protocol, which has been drafted with input from TeCSA and TECBAR, as well as from Coulson J, has taken into account a number of these suggestions. Its overall effect is to make the Protocol less onerous and expensive to comply with, which I am hopeful will lead to an increase in its popularity and its usefulness to the industry.

Main changes

There are several main changes to the Protocol:

The general aim of the Protocol has been modified, so that now only an outline of the claimant’s case need be given. Adding to the previous aims, which were to settle disputes fairly and early, there is now an additional aim to settle disputes inexpensively (paragraph 6).

The objective of the Protocol has changed from the exchange of early and full information, to the exchange of:

“…sufficient information to allow the other to understand its position and make informed decisions about settlement and how to proceed.”

Parties can agree to dispense with the need to comply with the Protocol (paragraph 2).

The requirements for a letter of claim and a letter of response have been amended so as to encourage brevity. A letter of claim should now contain a brief summary, which should be proportionate to the claim. The letter of response should also contain a brief and proportionate summary of the defendant’s position.

Expert reports are no longer required nor expected.

The timeframes for compliance have been shortened. Parties should normally meet 21 days (rather than 28 days) after the letter of response. The parties may agree to longer periods for the relevant steps, but the maximum extension for any step must not exceed 28 days.

A meeting will now only usually take place. It can take the form of an ADR process such as mediation (paragraph 9.3).

There is a new provision for the Protocol action to be concluded automatically at the completion of the pre-action meeting, or 14 days after expiry of the period within which the meeting should have taken place (paragraph 10).

Only in exceptional circumstances, such as flagrant or very significant disregard of the Protocol, will the Court impose costs consequences for non-compliance (paragraph 4).

Finally, a new protocol referee procedure has been introduced, which Michael Mendelblat considers. The referees will not be judges, but will be drawn from senior members of the bar and solicitors experienced in construction and engineering disputes who will be appointed by TECBAR and TeCSA, and the procedure will be administered by TeCSA.

In conclusion, I and my colleagues at TeCSA are confident that the revised Protocol goes a long way towards addressing concerns (both perceived and in some cases real) that the protocol process frontloads the costs of litigation and thereby reduces access to justice. We are optimistic that the new protocol referee procedure can be adopted in those situations where the parties need guidance as to how to comply with the Protocol. In short, in my view the changes introduced by the revised Protocol ensure that it is fit for its purpose. So no more moans. I, for one, will only extol its virtues, going forward.